Ask Eli

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: We are ready to buy a home, but not in a rush to do so we are wondering what the best time of year to buy a home is. Does it make more sense to buy now or should wait until the spring?

Answer: The right time of year to buy depends on the type of buyer you are and your priorities. The number of new properties listed for sale drops significantly in the fall and winter, so you may struggle to find the perfect home. However, demand drops too so properties spend longer on market and you have a better chance of negotiating a lower purchase price.

Buy in the fall/winter if…

• You are searching for a bargain
• The right home is just outside of your budget
• You have seen multiple homes for sale that you like
• You can’t bring yourself to offer full asking price

Wait until the spring/summer if…

• Your criteria are hard to match
• You are willing to pay top dollar for the perfect home
• You have to sell a home in order to qualify to buy your next home
• You don’t mind losing out to another offer

Let’s take a look at the data that supports the above statements. Here are some highlights of the chart and table shown below:

• December has by far the fewest number of newly listed homes for sale, followed by November and January
• Buyers who have offers accepted in December are able to negotiate the biggest discount from the asking price, but July-January also offer more favorable negotiating conditions for buyers
• If you’re looking to avoid competition, November-January have significantly less contract activity than the rest of the year
• If you like to take your time with decisions, the market moves notably slower July-January
• The single-family/townhouse market is influenced much more by seasonality than the condo market

Chart #1: The chart below shows the number of newly listed homes for sale in Arlington each month, going back the last three years.

Table #1: The table below is made up of Arlington home sales from 2015-2017, excluding new construction and anything that took more than 120 days to sell. I have highlighted the cells in green that are the most favorable for buyers. The table is based on the month that a sold home went under contract, not the month it actually sold (homes usually sell 30-60 days after they go under contract).

If you are considering buying a home and would like to discuss how you might be able to take advantage of a softer fall/winter market, feel free to reach out to me to schedule a time to meet. You can reach me by email at [email protected] or by phone at 703-539-2529.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: Do you know why GreatSchools.org changed the ratings for Arlington’s schools?

Answer: Sometime this summer, the popular school rating website GreatSchools.org changed their rating for most of the schools in Northern Virginia. If this sounds familiar, it’s because they made sweeping changes to their grading system less than a year ago, which I wrote about in March.

The previous changes resulted in a drop of 1-2 points for nearly every school in Northern Virginia, leaving Arlington with high schools rated 5, 4 and 3. The latest adjustments seem to have increased the rating for most schools, but some schools got dinged again like Jefferson Middle. After the latest changes, Arlington’s high schools are rated 8, 6 and 4.

School Ratings Influence Home Prices

If you’re wondering why I’m talking about school ratings in a real estate column it’s because the ratings issued by GreatSchools.org heavily influence where people buy and how much they’re willing to spend. You can debate the merits of these ratings systems all you want, but the fact is that they play a significant role in real estate.

While Niche.com generates the most traffic, I find that GreatSchools.org is much more popular locally and I think it’s due to the fact that they grade harder than Niche (Niche gives out a ton of A-, A, and A+ ratings).

What Changed?

I reached out to GreatSchools.org for details on why so many ratings were changed and was told something along the lines of “GreatSchools is always improving our rating systems to make sure it is as accurate as possible.”

Through various threads and Googling I did earlier this year, it sounded like the changes earlier this year were due to a new score for how well schools help under-performing students improve year-to-year.

I haven’t been able to find any information on why scores changed so dramatically this time around. If any of the readers have insight into the scoring adjustments, I would love to hear from you in the comments section or by email.

Tracking the Changes

GreatSchools would not provide me with historical ratings, so in March I compared scores I had recorded for clients in Fall ’17 to the new scores in March ’18.

Now that we have another round of changes, I added a column to that table so we can continue tracking past and current scoring trends.

Unfortunately, when I built the table in March I didn’t have any recorded scores for elementary schools and limited middle and high schools in Fairfax County.

Good News/Bad News

The good news is that the most recent adjustments helped almost all of Arlington’s schools, especially the high schools.

The bad news is that it hurts the credibility of GreatSchools.org and other rating systems because it makes it hard to rely on their ratings when you have a school like Yorktown HS go from a 7 to a 5 to an 8 in under a year.

Ultimately, consumers need to decide for themselves how much they rely on these scores to influence their decisions, but nothing beats talking to neighbors, joining online forums and calling or visiting a school.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: My husband and I are in the early stages of planning our first home purchase and currently trying to set a budget. What advice do you give clients to help them decide how much of a mortgage they can afford?

Answer: Spend too much and you’ll have a half-empty home for a few years. Don’t spend enough and you may be moving sooner than you hoped. This week we’ll break down some of the conversations I have early on with clients as they’re deciding how much mortgage they can afford.

How Much Are You Allowed to Spend?

I often find that professionals employed in the D.C. Metro are allowed to spend more than they actually want to spend. That’s a good thing! It means we have a lot of highly qualified buyers who have enough fiscal sense not to spend to their limits (ahem… US Government… ahem).

Even so, the first thing you’ll want to do is determine how much you’re allowed to spend by talking with a lender who will provide an honest, detailed review of your finances to let you know what your maximum loan and monthly payment amount is. A good lender will also serve as a valuable advisor as you plan your budget.

Here’s a link to a column I wrote last year with my favorite loan programs including low down payment options, 10% no PMI loans, and doctor loans.

Length of Ownership

I’ve said it before and I’m saying it again — the amount of time you expect to own your home is extremely important in your home-buying strategy and often glossed over.

If you are buying a 3-5 year home (accurate for many first-time buyers) your focus should be on value and keeping your cost down so that you give yourself room to save for your next purchase, which is likely a longer-term home. Your income and inflation are less likely to increase significantly in that time, so an expensive monthly payment now will still feel expensive in 3-5 years.

If you are buying a 10-15+ year home, the greatest value you’ll generate is choosing a home that suits you and your family long-term. The cost of buying something too small or too far from work that leads to a sale halfway through your intended ownership period is often much higher (taxes, commissions, closing costs, moving costs, etc) than the cost of moving into a slightly uncomfortable range of your budget.

Your mortgage payment hopefully won’t feel expensive forever if you’re in the first half of your professional career because you’ll likely have significant increases in income and, over time, the effects of inflation will minimize the stress of your mortgage (if it’s a fixed rate mortgage).

Monthly vs Down Payment

I find that most people based their budget on their savings and thus, the amount they have to put down towards a max purchase price. For some reason, monthly expenses often go overlooked so don’t forget to consider how much you’re comfortable spending each month which includes your mortgage, taxes (assume annual increases), applicable condo or HOA fees and homeowner’s insurance.

This doesn’t include a budget for maintenance and repairs, which should be estimated at an annual expense of 1-2% of your home’s value. Your purchase price budget is like the glamour muscles that everybody pays attention to, but the monthly payments are like your core muscles that support the whole thing… does that make sense to anybody else?

Savings is clearly an important factor in what you can afford. Your savings determines the amount you can put down; although with solid loan products available with as little as 3% down, many buyers qualify for a lot of house with little savings.

In addition to your down payment, you’ll pay 2-3% of the purchase price in closing costs like taxes, fees, insurance, and escrows (closing costs can be paid by the seller). Finally, don’t forget about what you’ll need after you close — moving and furniture add up quickly and you should always have 3-6 months of fixed/living expenses in savings in case of emergency.

Don’t Tempt Yourself

Once you decide on your budget, don’t allow yourself to visit properties that are highly unlikely to drop within your budget. One of the easiest ways to derail your progress is visiting homes 10-20% over budget, leading you to desire features that only exist together in homes you can’t afford. Save the window shopping for another time if you’re serious about buying a home now.

Ultimately, the best way to decide how much mortgage you can afford is to plan ahead by establishing a relationship with a lender and taking enough time to explore your options with an agent who understands the market and your needs.

With enough planning and work, you’ll be able to decide for yourself if the mortgage you can afford gets you the home you want, or if paying rent for another year is better than paying a mortgage.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: Why would anybody waste hundreds of dollars each month on condo fees?

Answer: I’ve seen a version of this statement/question numerous times in the comments section of my posts and I regularly have clients who are a great fit for a condo purchase, but rule it out because they consider condo fees to be a waste of money and bad investment.

The truth is that most people are looking at condo fees the wrong way and condos can offer huge financial advantages over a single-family home or townhouse.

Home Maintenance vs Condo Fees

Condo fees should mostly be bucketed in the same category as home maintenance and utility bills for a house/townhouse. The average condo fee for units sold in Arlington in 2018 is $484/month, which calculates to an annual fee of 1.3% of the average condo purchase price.

The nationwide rule of thumb is to expect home maintenance costs to be 1-2% of the cost of your home. The D.C. Metro has some of the highest labor costs and a large supply of older homes, so I generally recommend budgeting 2% of a home’s purchase price for annual maintenance.

The benefit of condos is that you are only responsible for the maintenance and repair of what sits inside the walls of your unit (plus a bit of plumbing outside of that) and possibly your heating & cooling system. Most condo fees also include utility costs like water, trash, sewer and gas while some also include electric or TV and internet.

When you compare the projected cost of condo fees, limited system maintenance (HVAC, water heater, appliances), and any individual utility costs against the projected costs of home maintenance and all utilities, you will almost always pay a lower annual percentage of your home’s value if you own a condo instead of a house/townhouse.

Predictable Expenses

Another under-appreciated financial benefit of condos is the ability to project your monthly housing expenses with a high level of confidence and stability.

With the majority of your maintenance and utility bills included in a fix monthly fee, you have very little risk of taking on a major, unexpected expense. Your biggest financial exposure in a condo tends to be HVAC (est $3,000-$10,000), appliances ($2,500+ for a full package), and water heater ($1,000-$1,500) and you can purchase a renewable home warranty for $400-$600/yr to alleviate an expense spike caused by one of those systems.

On the other hand, the unpredictability of major maintenance, repair or replacement costs in a house introduces another level of financial risk for home owners, often forcing them to hold a substantially higher emergency savings balance.

Damage to your main water or gas line? Better come up with $10,000+ quickly and that doesn’t include rebuilding any landscaping or hardscape that gets torn up in the process. Big storm exposes a leaky roof and basement? Possibly tens of thousands to fix and replace.

For many home owners, especially younger buyers with less savings and older home owners on a fixed income, the benefits of stable, predictable condo expenses are a smart financial choice.

Evil Condo Boards

Another concern I hear about condos is that the notoriously evil condo Board/Management (kidding, I was the Treasurer for 1800 Wilson for a few years and have all the respect in the world for condo Board/Committee members) will increase fees or bring special assessments (one-time fee levied against all owners, on top of their condo fee) on a whim just to screw owners over for thousands of dollars. This simply is not accurate.

First and foremost, the Board members are also owners and pay the same fee increases and special assessments as the rest of the owners. Second, most Boards try to limit fee increases to 1-3% annually. Proof? The average condo fee in Arlington has increased by less than 10% over the last five years. Finally, special assessments are generally a measure of last resort and uncommon.

If you are concerned about fee increases and/or special assessments, I strongly encourage you to attend Board meetings and participate on the Financial or Building Committees or as a Board member to personally oversee your investment.

Conclusion

Just because this column is pro-condo does not mean it is anti-single-family home/townhouse, but somebody had to stand-up to for the oft-bullied condo fee! I do hope this message reaches buyers who are a good fit for condos, but hesitant to consider them because of misinformation about the fees.

If you are considering buying a home or investment property and would like to discuss what type of property makes the most sense for you, feel free to send me an email at [email protected].

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: I’ve read a lot of articles that millennials are not buying homes and with Arlington being such a popular destination for millennials, do you see that causing a drop in real estate prices in the future?

Answer: I’m sorry. I can’t stand the constant millennial click-bait analysis either. I really didn’t want to write a column about millennials (born early 80’s through the 90’s), but here we are. Having been asked the same version of this question four times this month during meetings with homeowners, I figured it was worth addressing.

While accusing millennials of killing home buying isn’t as bad as accusing millennials of killing Mayonnaise, it’s just as misguided. Millennials are and will continue to seek home ownership like generations before them. Here’s why the “Millennials Don’t Buy” theory is wrong:

Most Millennials Are Not Old Enough

It makes sense to study the entire generation for things like media consumption, something that people do at all ages, but not home-buying. Currently, the youngest millennials are just heading to college and the oldest are in their mid-to-late 30’s.

Historically, the average first-time homebuyer has been in their early 30’s, so we’ve only seen about one-third of the generation reach average home-buying age. Let’s wait for more of the generation to reach their early 30s before we make broad assumptions about their home ownership preferences.

I’m confident that 5 years from now, home ownership trends amongst millennials in the DC Metro will be as strong or stronger than previous generations. The 20-somes I meet with are eager to stop renting and start building equity.

The Great Recession

For those that point to millennials waiting longer to buy their first or second home, historical perspective is important. The oldest third of millennials (those in their 30’s) were in the early stages of their careers during the Great Recession so the generation got off to a slow start saving up for a down payment and building an income to support a mortgage.

Tighter Lending Practices

The Great Recession also led to tighter lending practices (rightly so) requiring higher savings, higher incomes and more restrictions than before. Couple that with the difficulty building a savings and income, as noted above, and even those highly motivated to buy were forced to rent a bit longer.

Not Rushing to Major Milestones

Home buying is often aligned with other major life milestones like marriage and having children. As reported by ARLnow last week, the NY Times just released a study showing that Northern Va has three of the top ten counties with the highest average age for first-time mothers.

I believe this is tied to us having the most educated population in the US, thus people are spending their 20’s focused on education and careers, not thinking about marriage, children and buying a home until later in life. This does not mean millennials don’t believe in home ownership, as many news articles have led you to believe, they’re just not rushing to get there.

Whether you are a millennial navigating your first home purchase, a Boomer or Silent Generation homeowner looking to “right-size,” or anywhere in between, the Eli Residential Group is here to help.

Call (703-539-2529) or email me any time to talk or schedule a meeting.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: I will be renting my condo when I move and don’t need my furniture. Should I rent my apartment furnished, partially furnished, or unfurnished?

Answer: I get this question a lot and it’s common for landlords, especially new ones, to struggle with this decision. There’s not one right answer, rather a few good options, each with its own pros and cons that you should choose from based on your financial goals and what type of landlord you want to be. I’ll go through a few, but you can mix and match strategies to fit your goals. DO NOT furnish anything you want to keep long-term (e.g. family heirlooms).

1. Quick rent, flexibility: Offer unfurnished at market rate and include a comment that it can also be rented furnished for a 10-25% premium (depending on quality and extent of furnishings).

Be willing to negotiate for partially furnished because somebody may have a sofa and bed, but want your coffee table, dressers and silverware.

The value of furnished vs. unfurnished depends on the type of tenant likely to move in. For example, a recent college grad will value avoiding the expense of buying/moving furniture, but a young family likely has everything they need and wants to keep most/all of it.

• Pros: largest pool of renters; best chance to rent quickly; more likely to find a long-term tenant (24+ months)
• Cons: high chance of having to quickly sell-off unwanted furniture at a deep discount or pay to store it; can take a long time to find a tenant who will pay a premium for a furnished apartment for 12+ months

2. Top $, unpredictable: Target the corporate rental market by offering short-term (monthly) rentals at a premium (50+% above market).

• Pros: great returns when occupied; low probability of late or non-payment; lower risk of excessive wear & tear during occupancy; may find long-term corporate client
• Cons: high turnover; unpredictable cash flow due to more vacancy days; high cost of renting (prepping for new tenant to include cleaning service and possibly handyman); smaller pool of potential renters

3. Daily rental, active management: The extreme version of #2. Use a site like AirBnB or VRBO to capture the massive tourism and business traveler market by turning your apartment into a daily rental. I’ll leave income fluctuation/predictability out of the pro & con list because ratings, pricing, marketing, and experience because they’ll likely start as a negative and develop into a positive, over time.

If you aren’t living in the immediate area, this becomes a less appealing option.

• Pros: potential for huge return; opportunity to meet interesting people and be a local tour guide
• Cons: requires constant attention/management; high cost of operation; increased wear & tear; Arlington County requires owners to occupy the dwelling for 185+ days per year

A few notes to help with your decision:

• Fully Furnished = everything from couches to silverware to a TV
• Property Managers handle things like rent collection, service/handy calls, and the eviction process if necessary. On average, they charge 6-10% of the rental income for their services.
• If you choose to list through a Realtor, expect to pay anywhere from 75-100% of one month’s rent, but make sure you’re getting things like a full MLS/MRIS listing with professional photos

Our team also handles rentals so if you are thinking about renting a property you own or would like help finding an investment property to rent, feel free to send me an email at [email protected] to find out how we can help.

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Rosslyn resident. Please submit your questions to him via email for response in future columns. Enjoy!

I’m flipping the Q&A format this week and asking you a question!

Most people agree that the most important quality to look for when selecting a real estate agent is somebody who writes a weekly real estate column for ARLnow, but after that, what is the most important quality you look for when selecting a real estate agent? Please respond in the poll below:

I have found that most people look for somebody they can trust first and vary on the next 3-5 most important qualities. Trust is always my leading qualifier when I’m searching for a provider inside or outside of real estate.

Thanks for participating!

If you’d like a question answered in my weekly column, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.